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and even created a basic tech demo for it, at that.
the story goes that Sierra, their publisher at the time. got the rights to make games based off the books (but not the then-recent films, there was an unusual legal situation at the time where Electronic Arts was able to pick them up seperately.)
and decided to enlist Troika to create a pitch for it using Arcanum's engine. the concept (footage of which is shown in the video) was a prequel involving a sort of "shadow Fellowship" who would clear the path for the protags of the actual books, and notably retooled the underlying engine to use full pre-rendered backgrounds for areas, rather than the tile-based system used previously.
while Sierra waws reportedly pleased with the results, they changed their minds about having Troika develop it. moving the game in-house. the modified engine and it's enhancements would still end up being used in Torika's next release (The Temple of Elemental Evil), however.